Textile Enterprises Go Out To Shandong, Willing To Merge Cotton Giant "Coby"

When domestic and foreign cotton prices are upside down 4500 yuan / ton and domestic cotton enterprises are suffering from the import quota of stir frying cotton, Shandong Ruyi group's vision extends directly to overseas.

In September 5th, Ruyi group's listed company.

Ruyi internal executives confirmed to our reporter that Ruyi group is working with Lempriere Pty Ltd, an Australian wool processing enterprise, to acquire the largest local brand at a 230 million Australian dollar (1 billion 500 million yuan).

The company is the cotton production base of the city.

At present, the acquisition was approved by Australian Treasury Secretary Swann and was disclosed on the official website of the government in August 31st.

However, this company, which occupies 1/10 of Australia's cotton production, has stirred waves in the country. Opponents think it is Australia's "strategic" asset, which will be eroded or eroded by local cotton farmers.

Operation of treasury than listing

"Shandong has not yet signed the final agreement," he said.

The aforementioned internal executive said that the two sides have already reached a preliminary acquisition plan, and the Australian government has agreed to the plan.

Located in southeastern Queensland, it is the largest private farm in Australia, with an area of nearly 93 thousand hectares. It operates large-scale cotton and water conservancy projects. It has 51 water permits and a total of 539 million cubic meters of water on the river, exceeding the total water volume of the Sydney port.

However, due to poor management and long drought, the total debt of over 320 million Australian dollars was bankrupt in 2009. The Australian government tried to finance its nationalization, but failed.

And the creditors of the company, including the Australian National Bank and the sun group bank, have been stopping by selling the cotton products of the company.

"The merger will end the uncertainty in the operation of the crow farm project, ensure the normal operation of the farm, and the local employment and economic operation," the Australian Treasury said in a statement.

"The price of the purchase is 230 million."

According to the executive, in accordance with the initial plan, Ruyi Group acquired 80% of its shares, and the company bought 20% stake.

In accordance with the acquisition requirements, the acquisition of the ratio of the need to operate the listing, so that the Group intends to 80% of the shares diluted to 51%.

Ruyi group has agreed to the above restrictions and promised to reduce its stake in the farm to 51% by way of selling shares to third parties over the next 3 years.

According to the above agreement, Shandong Ruyi group needs to pay about 1 billion 200 million yuan of acquisition fund.

Ruyi group was founded in 1972, formerly known as Jining, Shandong.

The factory claims to have the largest wool textile industry chain and cotton textile printing and dyeing industry chain in China. The company covers wool making, worsted, garment, cotton textile, cotton printing and dyeing, knitting, chemical fiber, denim, home textiles, real estate and other industries.

The company's official website shows that the group has a total assets of 13 billion 100 million yuan, and has 2 domestic listed A shares and the main board of Tokyo, Japan.

It has 20 wholly owned and holding subsidiaries, 30 thousand employees, and 15 billion 300 million yuan in 2011, ranking 374 in the top 500 of Chinese enterprises. Its comprehensive competitiveness ranks five in the top 500 of China's textile and apparel industry, and the top five in the industry.

Acquisition resistance

"The domestic cotton price is 5000 yuan higher than the imported cotton price per ton."

The executive told reporters that the acquisition could improve the company's global industrial chain and provide a stable source of cotton for the main textile industry.

However, the resistance to Shandong's expansion is not small.

Australia, which has always relied on foreign capital development, has raised many conditions for the acquisition of Shandong in its acquisition.

First, once the acquisition is successful, the consortium of Ruyi and RP company in Shandong must reduce its shareholding ratio from 80% to no more than 51% within 3 years; secondly, the purchaser promises not to reduce jobs, and the treatment of all existing employees remains unchanged; thirdly, the local family business, the company will operate and manage the company; fourthly, with water subsidies, the purchaser agrees to sell all the unused quotas in the water market, which means that the government can repurchase all subsidies through the market.

In addition, once the acquisition is successful, Ruyi group must report the progress to the Australian Foreign Investment Audit Committee annually, so that the other side can verify whether or not the promise of the acquisition is fulfilled.

Nevertheless, after the disclosure of the purchase, it still caused opposition from Australian insiders.

Opponents believe that it is a strategic asset of Australia's cotton industry from the scale of the bank. If the acquisition is successful, Australia's largest licence and the holder of the largest irrigated land in the Southern Hemisphere fall into the hands of the Chinese.

"In this acquisition, water resources are the biggest problem, Australian water is very precious."

Wang Hengyan, senior investment Commissioner of the Greater China region of the Australian Trade Commission, told our reporter that at present, China has a large number of businessmen to invest in mineral resources in Australia, but there are still few investments in agriculture.

In fact, Australia has exported 75% of its cotton output to China.

It is revealed that the purchase case also needs to be submitted to the Chinese Ministry of Commerce for approval.

The logic of going to sea

"Overseas cotton is very attractive to China's cotton enterprises."

Hu Keqin, vice chairman of the China dyeing and printing industry association and deputy director general of Zhejiang Textile Engineering Association, told our reporter that this is because the domestic and foreign cotton price inversion is too serious in the past two years.

Hu Keqin said that since 2000, the domestic cotton textile industry has developed more rapidly, and the cotton consumption has been increasing, leading to higher domestic cotton prices, while the price of imported cotton is slightly lower, which has an impact on domestic cotton.

"This is because domestic cotton production is still in the production of small farmers, and the cost of production is relatively high. In the United States, Australia and other countries, the mechanization of large farms is high and production costs are low."

According to Wang Jianhong, Deputy Secretary General of China Cotton Association, China's cotton output is about 7 million 200 thousand tons in 2011/12, and its consumption is about 9 million tons.

In July this year, China's cotton price reached 18231 yuan / ton, compared to imported cotton prices, including import tax, only 14778 yuan / ton, the difference price reached 4500 yuan / ton.

According to the Chinese customs report, in the 1-7 month of this year, China's textile exports fell by 0.2% compared with the same period last year, while the import of cotton increased 133.7% to 3 million 460 thousand tons.

"In order to protect local cotton farmers, the NDRC issued a quota policy for imported cotton."

Hu Keqin recalled that in 2004, China imposed a quota of 894 thousand tons for cotton imports, which has not been changed for 8 years.

However, this cotton import quota is mainly concentrated in the hands of large state-owned cotton foreign trade enterprises and large textile processing plants, and many small and medium-sized cotton enterprises are unable to obtain the quota.

Every year, some enterprises that apply for quotas to the state do not have substantial cotton spinning production and trade. They get the quota and sell it back and forth. The quota ranges from 2800 yuan to 3500 yuan per ton in the market.

"If Cobi becomes an enterprise of Shandong's Ruyi subordinates, it can really save a lot of raw material costs."

Hu Keqin said that the current case of Chinese enterprises acquiring overseas large cotton enterprises is very few and should be the first case.